Insights on Real Estate

By Donovan Sim

The Discovery+ Series is a series of events, delivered through online digital solutions, which give students the chance to speak directly with working professionals, and learn about careers they aspire to enter. Given the developments in the COVID-19 situation, Advisory is keen to provide support to the many students who are experiencing woes in this time of disruptions, by digitalising professional mentorship.

The Discover+ Panel on Real Estate, held on 18 August 2020, was graced by

• Kemmy Tan (Moderator), Chief Executive Officer (CEO) of M+S;
• Lucas Loh, President and China’s Chief Executive Officer (CEO) of CapitaLand Group;
• Tang Wei Leng, Managing Director, Singapore at Colliers International; and
• Wong Sheau Fong, Divisional Director, Asset Development, Architecture and Land Planning at Sentosa Development Corporation (SDC).

Attendees included students at various levels of education with a desire to know the different career paths in Real Estate, and how to best position themselves for such roles.

What are the different professions within the real estate industry?

Projects usually involve no less than ten professionals. They include land developers , transportation planners, master planners, real estate consultants, architects and landscapers in. For coastal areas where climate change and resilience is more important, the civil engineers and biologists are also involved. For places to be developed into attractions, attraction specialists are also engaged.

How is the industry responding to a need for sustainability? What are developers concerned about?

Sustainability is a key focus for land developers now. It is important not only because of the responsibility to the environment and people, but also its significance to a firm’s existence in the market. There are investors who impose sustainability standards and requirements, and also tenants who will not rent buildings unless they meet certain sustainability standards. There are also building codes mandated by the government that must be complied with, and this varies from jurisdiction to jurisdiction.

Some land development firms have entire departments led by a ‘Chief Sustainability Officer’ appointed at the group level. This executive is charged with ensuring immediate and long-term sustainability requirements and targets are met.

How important is creativity in the real estate industry?

Creativity has led to much transformation of the industry. The use of digital platforms to conduct sales is an innovation not present before. Social media platforms such as Tik Tok are increasingly being used to advertise certain properties. Location plans are also now created digitally. Formalities too are being questioned. With COVID-19, Innovation has also allowed for the use of thermal scanners that help facilitate expeditious and contactless screening of people as they enter buildings.

Those engaged in routine and repetitive work are at risk of being replaced by automation. Even for a ‘brick-and-mortar industry’ such as this, new interfaces are being developed to facilitate communications with consumers. Hence, if one wishes to pursue a fulfilling career in real estate, he or she must display some level of creativity and innovation.

What kinds of skills and qualities do real estate consulting firms look out for in a potential employee?

First, employers are primarily concerned with ‘fit’, which refers to one’s ability to adopt the firm’s culture and values. Everyone is suited for a certain job, and different people work better in different environments. It is especially important for employees to have a positive attitude, a willingness to learn, and a willingness to seek clarity on issues that he or she is unfamiliar with.

Second, as the industry is multidisciplinary in nature, firms are increasingly recruiting those without real-estate backgrounds, such as art, history, and mathematics majors. For example, some jobs require specialised degrees, such as engineering and architecture. Other roles emphasise creativity, especially those in event management.

Everyone working in the real-estate industry needs to constantly push themselves to learn new things, because of the increasingly complex nature of the industry. This largely stems from the increasing number of amenities and services that need to be integrated into properties. Nevertheless, this also makes the work interesting.

How has COVID-19 changed the way the industry functions?

COVID-19 has changed the way shopping is carried out – there is less window-shopping, and more ‘target’ and online shopping. Traffic to malls was therefore at 80% of what it was during pre-COVID-19 time. Yet, retail sales have not decreased. Much advertising is also now conducted via live-streaming platforms, instead of on physical advertising spaces. In China, some 5-10% of staff at offices and shopping malls have not returned to work during COVID-19, even two months into the recovery phase. It may be presumed that this 5-10% are continuing to work from home, or may have been retrenched.

COVID-19 has accelerated the adoption of health-screening and security technologies in buildings, such as thermal sensors and face recognition software. These technologies are likely to remain in buildings even after the pandemic is over.

COVID-19 has also decreased the demand for the use of public spaces. This is because those who do not wish to attend classes, carry out social interactions, or complete their work at traditional spaces like schools and offices are able to do so virtually.

What is the difference between investment banking and commercial real estate?

First, investment bankers carry out the act of investing using a pool of resources, whereas real estate brokers merely facilitate the transaction.

Second, investment bankers must ensure that investments yield satisfactory returns, while the real estate broker merely advises clients on transactions.

Third, investment banking covers many sectors, of which commercial real estate is a subset. Furthermore, most investment bankers dealing with real estate work at the company-level, and not at the asset-level.

What is the difference between the real estate markets in China and Singapore?

The market in Singapore is more mature and has stabilised. However, the market in China being fairly young is therefore more transformational, competitive, and dynamic. In a mature market like that of Singapore, one has more time to deliberate with various stakeholders before implementing any plans. With the great demand in China, there is more aggressive testing of new ideas and concepts.

This does not mean that there are few business prospects in Singapore, as buildings will always need to be replaced and innovated upon. It however does mean that new large-scale business opportunities, such as the development of new towns will not be available.

Compared to Singapore, the behaviour differences of people born in different decades are more pronounced in China. Hence, a sales pitch to someone born in the 1980s would be very different from someone born in the 2000s. This also applies to the handling of employees.

What advantages do Singaporean real estate firms have in China?

Singaporean real estate firms have an advantage as they make more use of softwares and digital technologies in shopping centres, offices, and residential areas compared to those run by the Chinese companies. Singaporean real estate firms also have an advantage in capital markets. They are able to manage real estate investment trusts (REITs), conduct securitisation, and secure financing at a higher level. Of course, Chinese firms are catching up very rapidly.

Is the nature of the real estate industry in Singapore becoming more ‘financial’, and less ‘operational’?

Real estate and finance are intertwined. Securitising real estate does not ‘solve any problems’ if assets are simply not built or run well. Hence, the ability to handle ‘operational’ issues is equally important as the ability to handle ‘financial’ issues.

Moreover, it is not that the industry is becoming more ‘financial’ or ‘operational’, but that firms with stakes in these two issues are becoming increasingly segregated. Due to the nature of the market, no developers have the means of running and investing in hundreds of buildings in the long-run. Hence, the long-term running of and investment into these properties are more suited for long-term investors, such as sovereign-wealth funds and insurance companies.

Given the scarcity of land in Singapore, will degrees in real estate remain relevant?

Yes, an understanding of how to capitalise on real estate will always be a skill in demand. This requires knowledge of urban planning, urban design, real estate economics, demography, etc. The issue of financing only applies when one is trying to scale his or her business, and only after one can ensure that his or her properties are profitable. Furthermore, all interactions involve real-estate, such as opening a business, going to school, social interactions, living in a home, etc. Hence, real-estate will always be relevant.

What are some pieces of advice for those wishing to work in the real estate industry?

Seize the opportunities to engage in stints overseas, where you will be separated from your homes, families, friends and social-circles. The experience you gain will spur your career development and complement the experiences that you have gained in Singapore. Some land development firms also require executives to have at least a few years of overseas management experience before taking up roles in senior management. Even without this requirement, having an overseas experience will be a plus point when applying for roles in senior management.

What motivates real estate professionals to stay in the industry?

Some professionals are motivated by the opportunity to see how one can transform and develop lands and properties. Others are motivated by being able to watch junior staff maturing and growing as business leaders.